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An internet meme with a picture of the classic Monopoly game is circulating, accompanied by the following commentary: “Let’s play Monopoly with ten people. One person already has 90% of the money and real estate and has access to borrow money from the bank whenever they want. The other 9 people have to share the remaining 10%. And if you don’t like it you hate America and are a Communist.”
We don’t think so. First, one need not hate America nor be a communist to be upset that a single firm has dominance in a market—one merely needs to be a competitor or rival, or, more important, a dissatisfied customer.
But the unstated proposition of the meme is something like: Yep, that is American capitalism and, by golly, the government ought to do something about it. Which leads us to our second objection. Over the last 150 years, this complaint has been lodged continually. Supposedly, big incumbent firms have huge unfair advantages that can’t possibly be overcome. Yet consider the evidence.
At one time, AT&T had 100% of the long-distance phone market; GM, Ford and Chrysler had 90% of the domestic auto market; IBM had 70% of the computer market; Kodak had 90% of the film market. And who remembers the following firms: Radio Shack, which as recently as 1998 called itself the “single largest seller of consumer telecommunications products in the world”; A&P Grocery Stores, which, “from 1915 through 1975, was the largest grocery retailer in the United States”; and Blockbuster Video, which had over 6,000 stores in 2004? All had incredible advantages over their competitors. Today, they either no longer exist or no longer enjoy market dominance.
Why? Ends up a Monopoly game is a bad analogy for the real economy. As pointed out by our friend Ben Powell at Texas Tech University back in 2004, consumer choice plays no role in the game. If a player lands on Indiana Avenue in Monopoly, she pays the rent set by the game. In the real world, she has the option to seek a better deal down the board at Marvin Gardens. Consumer choice gives producers an incentive to develop better products and services while finding better production methods to lower prices; that is precisely why all the above-mentioned behemoths were tamed by their initially disadvantaged rivals.
Playing Monopoly can be a lot of fun, but don’t confuse it for a free market.•
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Bohanon and Curott are professors of economics at Ball State University. Send comments to ibjedit@ibj.com.
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Or maybe the popular perception that rapidly increasing market concentration is real is actually true as documented in Tepper and Hearn’s “The Myth of Capitalism” and Thomas Philippon’s “The Great Reversal.”